Concession agreement suggested for new airport in Saratov

The new gateway construction project in Saratov seems to have been affected by macroeconomics (Photo by Regional Airports)

The construction project of Saratov’s second airport is reported to be facing difficulties as the regional authorities are falling behind with linking the site to the road and engineering service lines. Russian airport operating group Airports of Regions suggests the federal government helping with the investments to ensure successful completion of the project.

The public authorities take their part in the new airport construction project under the 2010-2020 Russian Transport System Development Program.

The groundbreaking ceremony was conducted in October 2012 in Saburovka, near Saratov. However, four years later general director of Airports of Regions Evgeny Chudnovsky explained to the Russian Aviation Insider that situation at the construction site was rather challenging. Due to the current complications with the regional budget, ”it is only now that the local authorities are starting to get down to the project,” he adds.

Airports of Regions has already invested about half a billion rubles (more than 7 million US dollars) into the Saratov project. The company is ready to start the construction phase right away but there does exist a serious issue. Chudnovsky points out that considering the macroeconomic factors (for instance, ruble depreciation), the construction will now require more funding than expected. Under these circumstances, the project in its initial look is hardly feasible.

The company’s head reminded that one of the core ideas behind creating a new airport outside the city was growing aviation mobility of the local community. “Having eliminated infrastructural constraints of the existing airport, the aviation services might be significantly diversified while the people will get motivated to go flying,” Chudnovsky says. “The growth potential was quite good, as 450-500 thousand passengers per year for a million-city is definitely not the limit,” he goes on.

However, according to the top-manager the current financial estimate of the Saratov project shows there will be no increase in passenger traffic should it stick to earlier terms and conditions.

“We realize that if we retain the initial format, the whole concept of the project will get compromised. The new numbers that we get demonstrate the airport service rates will increase several times and the ticket price will grow ин 30%. And that is definitely a problem,” Chudnovsky says.

As a result, Airports of Regions addressed federal government with the idea of constructing the new airport in Saratov under a concession agreement. The regional administration supports the initiative.

“This is a common situation. If an investment project fails to generate revenues sufficient to break it even, a part of the funding comes in a federal grant within concession legal framework. Thus, the federal government covers some of the costs and when the project is completed, the end tariffs do not kill anyone. At the same time you still have an investor ready to put money in and efficiency that it provides,” Chudnovsky explains.

Airports of Regions is currently negotiating the details with the government. “Obviously, it is all going hard due to budget cuts in Russia in general. The best part is that we do not necessarily need the federal grants or any other subsidies before 2018. The project supposes the funding might come later – the concession legal framework provides that grantor’s payments might be stretched out over a really long period of time. It can even exceed the budget period itself,” the head of the airport holding adds.

Airports of Regions hopes the government will make up the decision about the concession agreement by the end of 2016.

Currently the company operates four active airports. It has built up new terminals in Koltsovo (Yekaterinburg), Kurumoch (Samara) and Strigino (Nizhny Novgorod). In Rostov-on-Don Renova operates an airport inside the city but is planning to move to new site called Yuzhny in about a year. The construction of a passenger terminal and other airport facilities is underway.

As of today Pulkov airport in Saint-Petersburg is the only one to have concession agreement experience.

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